FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

Whether a Bank Executive Convicted Under 31 U.S.C. § 5322(a) for
"Willful Failure to Report Currency Transactions'' is a Crime Under
Section 19 of the FDI Act.

FDIC--94--25

April 26, 1990

Nancy L. Alper, Counsel

This is in reply to your second inquiry regarding Mr. *** and
whether he is subject to section 19 of the Federal Deposit Insurance
Act ("section 19"), 12 U.S.C. § 1829.

This second inquiry raises the question of whether Mr. ***'s
conviction under 31 U.S.C. § 5322(a) for willful failure to report
currency transactions while serving as an officer of a bank constitutes
a crime involving dishonesty or breach of trust under section 19.

In the September 1968 Federal Deposit Insurance Corporation's
("FDIC") Corporation Guidelines and Policies with respect to
Section 19 ("Section 19 Policy Statement"), the FDIC has defined
dishonesty as follows:

Dishonesty means to cheat or defraud for monetary gain or its
equivalent, directly or indirectly, or to wrongfully take from any
person, property lawfully belonging to that person in violation of any
criminal statute or code; acts of dishonesty are further defined
to include, but not limited to such acts which involved want of
integrity, lack of probity, or a disposition to distort, defraud,
cheat, or to act deceitfully or fraudulently; and may also include
crimes which by Federal or State criminal statutes and codes are
defined as dishonest. (Emphasis added.)

1 Fed. Dep. Ins. Corp. 5155 (P-H). Thus, under the Section 19 Policy
Statement, monetary gain or its equivalent and a wrongful taking of
property are not necessary elements for a finding that an individual
has been convicted of a crime involving dishonesty.

We believe that the willful failure to report currency transactions
as required by 31 U.S.C. § 5322(a) involves a criminal offense
involving dishonesty. Such a violation comprises acts, which involve
". . . a want of integrity or probity . . . [and manifest] a
disposition to distort, defraud, cheat, or to act deceitfully or
fraudulently." Id. at 5155. Contrary to your contention
in your letter, the fact that Mr. *** might not have realized any gain
from these transactions does not determine whether a conviction
involves dishonesty under section 19.

In addition, by failing to report the currency transactions as
required by 31 U.S.C. § 5322(a), Mr. *** breached his fiduciary duty.
The Section 19 Policy Statement states that an omission,
misappropriation or a wrongful use of funds with respect to any
property or fund which has been lawfully committed to a person in a
fiduciary capacity constitutes a breach of trust. Here, Mr. ***
committed an act of omission with respect to property that had been
lawfully committed to him.

In our response to your first inquiry concerning whether Mr. *** was
particularly directly or indirectly in any manner in the conduct of the
affairs of an insured depository institution such as to require a
section 19 application, we stated that "certain activities by their
nature are so closely related to banking or managing or controlling
insured depository institutions as to be a proper incident
thereto. . . .". We continue to believe that Mr. ***'s activities
as a consultant providing advice and services in the area of
acquisitions to *** Incorporated are so closely related to banking,
managing or controlling an insured depository institution as to
constitute participation directly or indirectly in the conduct of the
affairs of such an institution. Accordingly, we have concluded that a
section 19 application would be required to be filed on behalf of Mr.
***.

However, as we stated in our first letter, you should note that
under 12 C.F.R. § 308.101(b) of the FDIC's Rules and Regulations, a
section 19 application may be filed only after three years from the
date of a final conviction. If Mr. ***'s conviction occurred more than
three years ago, a section 19 application may be filed.

In accordance with this discussion and if appropriate at this time,
a section 19 application should be executed and sent to:

Mr. George J. Masa

Regional Director (Supervision)

Federal Deposit Insurance Corporation

30 South Wacker Drive

Suite 3100

Chicago, Illinois 60606

Please note that a knowing violation of section 19 may result in a
fine of $1,000,000 for each day of violation or imprisonment for not
more than five years, or both. I hope that this discussion has been
useful.